FMC Rejects Japanese Trio’s Shipping Agreement

Image Courtesy: NYK Line

The US Federal Maritime Commission (FMC) rejected on jurisdictional grounds the Tripartite Agreement to form a joint container shipping service submitted for approval by the Japan’s big three carriers in March 2017.

The Commission determined that parties to the Tripartite Agreement, Kawasaki Kisen Kaisha (K Line), Mitsui O.S.K. Lines (MOL), and Nippon Yusen Kabushiki Kaisha (NYK Line), were ultimately establishing a merged, new business entity and that action “is among the type of agreements excluded from FMC review” as the Shipping Act does not provide the Federal Maritime Commission with authority to review and approve mergers.

K Line, MOL, and NYK were seeking authority to share information with each other in advance of a new business entity being formed under the agreement next year. Absent FMC’s latest vote, or a Request for Additional Information, the agreement would have gone into effect on May 8.

The three companies unveiled their intentions to establish a joint venture in October 2016 to merge their container liner shipping business, and their container terminal services businesses outside Japan.

The parties also provide logistics services, bulk shipping, car transport, and liquid transport, through their subsidiaries. However, such services will continue to be conducted by the companies separately and independently from each other and the JV.

In March 2017, the parties received an approval for their joint venture from the Competition Commission of Singapore (CCS), which informed that the only overlapping service that would affect Singapore is the provision of container liner shipping services.

They jointly applied for a decision by CCS on whether the creation of the JV would infringe the prohibition in the Competition Act against anti-competitive mergers. CCS concluded that the move, if carried into effect, “will not infringe the prohibition in the Act against anti-competitive mergers.”

The parties earlier said that the new joint-venture company would operate a fleet totaling 1.4 million TEUs, placing the new company as sixth in the market with approximately 7% of global share.

K Line and MOL, which will each hold 31 percent, and their compatriot NYK Line, which will hold the remaining 38 percent, in October informed that they plan to establish the new company on July 1, 2017, while business commencement was expected to start as of April 1, 2018.

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